How to Start a Business in the UK: the 2026 Step-by-Step Guide

Starting a business in the UK is quicker and cheaper than most people expect: a sole trader can register free with HMRC in an evening, and a limited company costs £100 online. What trips new owners up is everything around the registration — tax deadlines they didn't know about, a licence they needed, insurance that turned out to be compulsory, or a Making Tax Digital rule that changed in April 2026. This guide walks through each step in the order you actually need it, with the rules as they stand in 2026 and links to our detailed guides for every stage.

Quick answer

To start a business in the UK, choose a structure (sole trader, partnership or limited company), register it — with HMRC for Self Assessment, or with Companies House for a company — then check whether you need VAT, a licence, insurance or payroll. Open a separate bank account, keep digital records from day one and, if you need funding, look at a government-backed Start Up Loan.

• Sole trader: register with HMRC by 5 October after the end of the tax year you started once income passes £1,000 — free

• Limited company: £100 with Companies House; every director must verify their identity first

• VAT is compulsory once taxable turnover passes £90,000 in any rolling 12 months

• Making Tax Digital for Income Tax applies above £50,000 from April 2026, falling to £20,000 by April 2028

• Start Up Loans: £500–£25,000 at 7.5% fixed, with 12 months' free mentoring

Step 1: Test the idea before you register anything

Registration is the easy part; finding paying customers is the hard part. Before you spend money, check that people will pay for what you plan to sell and at a price that leaves you a profit. Talk to ten potential customers, look at what competitors charge, and work out your costs per sale. If you can, take a few paid orders before buying stock or signing a lease.

Write a short business plan even if no lender asks for one. It doesn't need to be long: what you sell, who buys it, how you reach them, what it costs to deliver and how much you need to live on. A Start Up Loan application requires a plan and a cash-flow forecast, so doing this now saves time later. Our free business plan generator gives you a structure, and the startup cost calculator helps you list one-off and monthly costs.

Work out your break-even point too. If your van, insurance, phone and software cost £600 a month and each job leaves £60 after materials, you need ten jobs a month just to cover costs before you pay yourself anything. Seeing that number early changes how you price.

Starting a UK business at a glance

Step 1

Test the idea

Step 2

Choose a structure

Step 3

Register with HMRC or Companies House

Step 4

Licences and insurance

Step 5

Bank account and records

Step 6

Start trading

then VAT, MTD and payroll as you grow

Step 2: Choose your business structure

The structure you pick decides how you're taxed, who is liable for debts and how much paperwork you'll do. Most small businesses start as one of three.

Sole trader. You and the business are legally the same. You keep all the profit after tax, pay Income Tax and Class 4 National Insurance through Self Assessment, and file one return a year. Registration is free. The catch is unlimited liability: if the business can't pay its debts, creditors can come after your personal assets. Most freelancers, tradespeople and side businesses start here.

Partnership. Two or more people run the business together and share profits. Partners are personally liable for the partnership's debts. One partner is the nominated partner, who registers the partnership with HMRC and files the partnership return; each partner also files their own Self Assessment return on their share. Put a written partnership agreement in place covering profit shares and what happens if someone leaves. A limited liability partnership (LLP) is a separate structure registered at Companies House.

Private limited company. The company is a separate legal person. It pays Corporation Tax at 19% to 25% on its profits, and you pay personal tax on the salary and dividends you take out. Your liability is normally limited to what you put in for your shares. In exchange you take on public filings at Companies House, a company tax return and usually payroll.

There's no single right answer. At modest profits a sole trader often pays similar or less tax with far less admin; a company tends to pay off at higher profits, when you want to retain profits in the business, or when liability protection matters. We run the numbers at several profit levels in our sole trader vs limited company comparison. You can start as a sole trader and incorporate later — many people do.

Sole trader vs partnership vs limited company

	Sole trader	Partnership	Limited company
Register with	HMRC (Self Assessment)	HMRC (partnership + each partner)	Companies House, then HMRC
Cost to register	Free	Free	£100 online
Liability for debts	Unlimited, personal	Unlimited, shared	Limited to share capital (usually)
Tax on profit	Income Tax + Class 4 NI	Each partner on their share	Corporation Tax 19%–25%, then tax on pay and dividends
Public information	None	None	Directors, shareholders, accounts
Yearly admin	One tax return	Partnership return + personal returns	Accounts, CT600, confirmation statement, payroll

Register with

Sole trader

HMRC (Self Assessment)

Partnership

HMRC (partnership + each partner)

Limited company

Companies House, then HMRC

Cost to register

Sole trader

Free

Partnership

Free

Limited company

£100 online

Liability for debts

Sole trader

Unlimited, personal

Partnership

Unlimited, shared

Limited company

Limited to share capital (usually)

Tax on profit

Sole trader

Income Tax + Class 4 NI

Partnership

Each partner on their share

Limited company

Corporation Tax 19%–25%, then tax on pay and dividends

Public information

Sole trader

None

Partnership

None

Limited company

Directors, shareholders, accounts

Yearly admin

Sole trader

One tax return

Partnership

Partnership return + personal returns

Limited company

Accounts, CT600, confirmation statement, payroll

Step 3: Pick a name and check it's free to use

A sole trader can trade under their own name or a business name. A business name can't include "Limited", "Ltd", "LLP" or "plc", can't be offensive and can't use sensitive words — such as "Royal", "Bank" or "Chartered" — without permission. You also can't pass yourself off as an existing business, so search the Companies House register and the Intellectual Property Office's trade mark search before you print anything.

A company name must end in "Limited" or "Ltd" and must not be the same as one already on the register. Differences such as "UK", punctuation or an added "s" don't make a name different. Check the matching domain name and social media handles at the same time; it's frustrating to register a company and then find the website address is taken. Our business name generator is a quick way to build a shortlist.

On invoices, a sole trader using a business name must also show their own name and a business address. A company must show its full registered name, company number and registered office address.

Step 4: Register with HMRC or Companies House

Registering as a sole trader

You register for Self Assessment online through your HMRC account. HMRC then posts you a 10-digit Unique Taxpayer Reference (UTR), which you need to file your return. The deadline to register is 5 October after the end of the tax year you started. So if you start trading in October 2026, which falls in the 2026 to 2027 tax year, you must register by 5 October 2027 and file your first online return by 31 January 2028.

You don't need to register if your gross trading income — before expenses — is £1,000 or less in the tax year, because the trading allowance covers it. Many people register anyway so they can build a National Insurance record or claim losses. Our sole trader registration guide covers every screen of the process, and Self Assessment explains the return, payments on account and penalties.

Registering as a sole trader with HMRC

1. 1

   Create or sign in to your HMRC account

   Use GOV.UK One Login or your existing Government Gateway details.

2. 2

   Register for Self Assessment as self-employed

   Give your start date, business name, address and type of work.

   Register for Self Assessment
3. 3

   Wait for your UTR

   HMRC posts your 10-digit Unique Taxpayer Reference, usually in around 15 days.

4. 4

   Keep records and file by 31 January

   File online after the tax year ends and pay any tax due by the same date.

Registering a limited company

You incorporate online with Companies House for £100; most applications are approved within 24 hours. Before you can file, every director must verify their identity and get a Companies House personal code. This became a legal requirement on 18 November 2025 under the Economic Crime and Corporate Transparency Act. It's free through GOV.UK One Login using a passport or photo driving licence, or you can pay an authorised agent such as an accountant to do it.

You'll also need a registered office address in the right UK nation, a registered email address, at least one shareholder, details of people with significant control and a SIC code describing your activity. Registering online sets up Corporation Tax automatically; you then tell HMRC within 3 months after starting to do business. The limited company set-up guide has the full walkthrough, and our public limited company guide explains when a plc makes sense (rarely, for a start-up).

Step 5: Check VAT and Making Tax Digital

VAT

You must register for VAT if your taxable turnover — sales, not profit — goes over £90,000 in any rolling 12-month period, or if you expect it to go over that in the next 30 days alone. Check the rolling total at the end of every month; it isn't a tax-year test. Once registered you charge VAT, usually at 20%, and file VAT returns using Making Tax Digital software.

You can register voluntarily below the threshold. That makes sense if your customers are VAT-registered businesses, who can reclaim what you charge, or if you have big VAT-able start-up costs to reclaim. It rarely makes sense if you sell mainly to the public, because your prices go up by a fifth or your margin goes down. Our VAT registration guide covers the 30-day rules and the Flat Rate Scheme, and the VAT calculator helps you price.

Making Tax Digital for Income Tax

This is the biggest change for new sole traders and landlords in 2026. From 6 April 2026, anyone whose qualifying income — self-employment and property turnover combined, before expenses — was over £50,000 must keep digital records in compatible software and send HMRC a quarterly update, plus a final return. The threshold falls to £30,000 from April 2027 and £20,000 from April 2028.

Making Tax Digital for Income Tax — who joins when

Qualifying income over	Based on the return for	Must use MTD from
£50,000	2024 to 2025	6 April 2026
£30,000	2025 to 2026	6 April 2027
£20,000	2026 to 2027	6 April 2028

£50,000

Based on the return for

2024 to 2025

Must use MTD from

6 April 2026

£30,000

Based on the return for

2025 to 2026

Must use MTD from

6 April 2027

£20,000

Based on the return for

2026 to 2027

Must use MTD from

6 April 2028

HMRC judges qualifying income on a tax return you've already filed, so a brand-new business won't be caught in its first year. But if you expect turnover above £20,000, pick MTD-compatible bookkeeping software from the start rather than switching mid-stream. Late quarterly updates earn penalty points, and at 4 points you face a £200 fine. The Making Tax Digital guide explains the quarters, software and exemptions.

Step 6: Licences, permits and registrations

Plenty of businesses need no licence at all, but many common ones do. Using the wrong premises or trading without a licence can mean fines and closure, so check before you open. The GOV.UK Find a licence tool lets you search by activity and filter by England, Wales, Scotland or Northern Ireland. Your local council's licensing team is the next stop, because councils issue most of these.

Activities that typically need a licence, permit or registration include:

• Food. Register a food business with your local council at least 28 days before you start, including home bakers and market traders. You'll get a food hygiene inspection and rating.
• Alcohol, entertainment and late-night food. A premises licence for the venue and a personal licence for the person who authorises sales (in England and Wales).
• Street trading and markets, taxis and private hire, skin piercing and tattooing, animal boarding and breeding, and childcare (Ofsted registration in England).
• Waste. A waste carrier registration if you transport waste — relevant to builders, gardeners and clearance firms.
• Music. A licence to play recorded or live music in public.
• Regulated financial activities need Financial Conduct Authority authorisation, including consumer credit.

The ICO data protection fee

Nearly every business that holds personal information electronically — customer emails, CCTV, staff records — must pay the Information Commissioner's Office a data protection fee unless an exemption applies. A micro business (turnover up to £632,000 or no more than 10 staff) pays £52 a year and a small or medium one pays £78, with £5 off by direct debit. The ICO has a short self-assessment tool to check whether you're exempt.

If you'll run the business from a rented home, check your tenancy and mortgage terms, and tell your home insurer. If customers or staff will visit, or you change the use of the property, you may need planning permission and you could become liable for business rates on part of the home.

Before you open the doors

0/6

• Searched GOV.UK Find a licence for your activity and UK nation
• Spoken to the council licensing team if you sell food, alcohol or trade on the street
• Registered your food business at least 28 days before opening (if relevant)
• Checked whether you must pay the ICO data protection fee
• Checked your lease, mortgage or tenancy allows business use
• Arranged employers' liability insurance before anyone starts work for you

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Step 7: Insurance

Only one type of business insurance is compulsory for most firms: employers' liability insurance. As soon as you employ anyone — including part-time or casual staff — you need cover of at least £5 million from an authorised insurer, and you can be fined £2,500 for every day you're not covered. Family businesses employing only close relatives are often exempt, as is a company whose only employee is a director who owns 50% or more of the shares.

Other cover is optional by law but often required by contracts or common sense:

• Public liability if customers visit you or you work in their homes or premises. Many councils, venues and main contractors won't let you work without it.
• Professional indemnity if you give advice or design work — consultants, accountants, architects, IT contractors. Some professional bodies make it compulsory.
• Business use on your car or van insurance — ordinary social policies won't cover driving to client sites, and a claim can be refused.
• Stock, equipment and contents cover, especially if you work from home: household policies often exclude business equipment.

Get quotes from a broker or a few direct insurers and read the exclusions. A cheap policy that excludes the work you actually do is worthless.

Step 8: Open a business bank account and set up your records

A limited company needs its own bank account in practice, because its money isn't yours; taking cash out other than as salary, dividends or loan repayments creates tax problems. A sole trader can legally use a personal account, but a separate one makes bookkeeping, tax returns and any HMRC enquiry far easier. Banks will ask for photo ID and proof of address, and for a company, the company number and details of every director and major shareholder.

From day one, keep a record of every sale and every expense, with receipts. HMRC expects you to keep records for at least five years after the 31 January filing deadline for sole traders, and six years for companies. Use bookkeeping software or a spreadsheet you update weekly rather than a shoebox you sort out every January. Issue proper invoices showing your name or business name, address, invoice number and date — our invoice generator does this free.

Step 9: Taking on staff

Before your first employee's first payday you must register as an employer with HMRC and run payroll through PAYE, reporting each payment in real time. That includes paying yourself a salary as a company director. You'll also need to check every new hire's right to work in the UK (the civil penalty for an illegal worker can reach £60,000 per worker), pay at least the National Living Wage of £12.71 an hour for workers aged 21 and over, enrol eligible staff in a workplace pension and arrange employers' liability insurance.

Employer National Insurance is 15% on earnings above £5,000 a year, but most small employers can claim the Employment Allowance of up to £10,500 a year to offset it. A company whose only employee is a single director can't claim it.

Be careful with "self-employed" helpers. If someone works set hours under your control, uses your tools and can't send a substitute, they may legally be an employee whatever your agreement says. HMRC's Check Employment Status for Tax tool helps you test it.

Step 10: Funding your start-up

Most UK businesses start with the owner's savings, a bit of revenue reinvested, or family help. If you need more, the main government-backed option is a Start Up Loan, run by the British Business Bank.

Start Up Loans in 2026

£500–£25,000

Loan per founder

Personal, unsecured loan

7.5%

Fixed interest

Up from 6% on 6 April 2026

1 to 5 years

Repayment term

No early repayment fee

12 months

Free mentoring

Plus help with your business plan

To qualify you must be 18 or over, live in the UK with the right to work here, and be starting a business or have been trading for less than 5 years (the limit was 36 months until April 2026). It's a personal loan, so it goes on your credit file and you're personally liable to repay it even if the business fails. Co-founders can each apply, and you'll need a business plan and cash-flow forecast. There are no application fees.

As a rough example, borrowing £10,000 at 7.5% over five years costs about £200 a month, or roughly £12,000 in total — work out your own figure with the official repayment calculator before you apply.

Other routes worth knowing:

• Grants are rarer than people think and usually tied to a sector, region or aim such as net zero. Check your local council and Growth Hub, which also run free advice workshops.
• Bank loans and overdrafts usually need trading history or a personal guarantee.
• Asset finance spreads the cost of vans, machinery or equipment.
• Equity investment from angel investors or crowdfunding suits companies with high growth potential; investors may ask about SEIS or EIS tax relief eligibility.

Whatever you borrow, plan for tax. A sole trader who makes a good profit in year one may face a first tax bill plus a payment on account for the next year, both due on the same 31 January.

Your first-year tax and compliance calendar

Example — sole trader starting on 1 November 2026

Before trading

Check licences, insurance and the ICO fee; open a bank account

1 Nov 2026

Start trading; record every sale and expense

5 Apr 2027

First tax year (2026 to 2027) ends

5 Oct 2027

Deadline to register for Self Assessment

31 Jan 2028

File the 2026 to 2027 return online and pay the tax, plus any first payment on account

31 Jul 2028

Second payment on account (if due)

Monthly

Check rolling 12-month turnover against the £90,000 VAT threshold

A company's calendar is different: accounts are due at Companies House 9 months after the year end (21 months after incorporation for the first set), Corporation Tax is due 9 months and 1 day after the end of the accounting period, and a confirmation statement costing £50 is due every year. Our Corporation Tax and dividend tax guides explain how company profits reach your pocket.

Common mistakes new UK business owners make

• Not setting tax aside. Put 20% to 30% of every payment into a separate savings account. The first Self Assessment bill, with a payment on account, catches many people out.
• Registering late. Missing the 5 October registration deadline can lead to a failure-to-notify penalty based on the tax unpaid.
• Mixing personal and business money. It makes records unreliable and, for a company, can create an overdrawn director's loan account.
• Forgetting VAT is a rolling test. Owners who only check at the tax year end often register months late and owe VAT they never charged.
• Assuming you're too small for insurance or the ICO fee. One customer injury or a data complaint costs far more than the premium.
• Ignoring HMRC letters. Read everything from HMRC and Companies House, and save the HMRC contact numbers for when something doesn't look right. If you overpay, the HMRC tax refund guide explains how to claim it back.

Getting the order right also matters for working out what you'll actually take home. Our self-employed tax guide walks through a full 2026 to 2027 calculation for a sole trader, including Class 4 National Insurance.

Official GOV.UK and government links

• Set up a businessChoose a structure
• Register for Self AssessmentSole traders and partners
• Register your companyCompanies House, £100
• Find a licenceSearch licences by activity and nation
• Register for VATThreshold and how to register
• Apply for a Start Up Loan£500–£25,000
• Pay the data protection feeICO registration
• Business.gov.ukGovernment business support and guidance

What to do next

Pick your structure today — if you're unsure, read the sole trader vs limited company comparison — then register, check licences and insurance, and open a bank account before your first sale. Budget your first twelve months with the free budget planner, and send your first invoice with the invoice generator.

This is general information, not legal or tax advice — confirm on the official source or with a professional.

Frequently asked questions

How much does it cost to start a business in the UK?

Registering as a sole trader with HMRC is free. A limited company costs £100 to register online with Companies House, and identity verification through GOV.UK One Login is free. Beyond that, costs depend on your trade: insurance, any licence, equipment, a website and possibly the ICO data protection fee of £52 a year for a micro business. Many service businesses start for a few hundred pounds.

Do I need to register my business before I start trading?

A limited company must be registered with Companies House before it trades. A sole trader can start trading straight away and must register for Self Assessment by 5 October after the end of the tax year you started, once gross trading income passes £1,000 in a tax year. Registering early does no harm and gets your UTR in hand before the filing deadline.

Can I start a business while employed?

Yes. Many people start a side business while keeping a job. Check your employment contract for clauses on outside work, competing with your employer or using their equipment. For tax, your salary uses up your personal allowance first, so business profit may be taxed from the first pound. You still register for Self Assessment once trading income goes over £1,000.

Can I start a business with no money in the UK?

You can start a service business with very little: registering as a sole trader is free and you can work from home with equipment you own. If you need funding, a government-backed Start Up Loan offers £500 to £25,000 at 7.5% fixed, with free mentoring. Avoid high-interest credit cards for start-up costs, and test demand before spending.

What is the easiest business structure to start in the UK?

Sole trader. You register online with HMRC for Self Assessment, get a Unique Taxpayer Reference and file one tax return a year. There is no Companies House filing and no fee. The trade-off is unlimited personal liability for business debts, which is why some owners later move to a limited company.

Do I need a licence to start a business?

Only for some activities. Selling alcohol, running a food business, street trading, taxis, childcare, hair and beauty treatments such as tattooing, animal boarding and many more need a licence, permit or registration. Use the GOV.UK Find a licence tool and check with your local council. Food businesses must register with the council at least 28 days before opening.

Sources & verification

Figures on this page were checked against the sources below when it was last reviewed on 7 October 2026. Each rate and limit is stored once with its own official source and review date, and official update channels are monitored daily so changes are picked up. How we verify

1. 1.Set up a business — GOV.UK · accessed 7 October 2026
2. 2.Set up a business partnership — GOV.UK · accessed 7 October 2026
3. 3.Apply for a Start Up Loan for your business — GOV.UK · accessed 7 October 2026
4. 4.Changes to interest rate and eligibility criteria — Start Up Loans (British Business Bank) · accessed 7 October 2026
5. 5.Applying for a Start Up Loan — Business.gov.uk (Department for Business and Trade) · accessed 7 October 2026
6. 6.Find a licence — GOV.UK · accessed 7 October 2026
7. 7.Dealing with licences and regulations — Business.gov.uk · accessed 7 October 2026
8. 8.Guide to the data protection fee — Information Commissioner's Office · accessed 7 October 2026
9. 9.Register your company — Companies House / GOV.UK · accessed 7 October 2026
10. 10.Register for VAT — HMRC / GOV.UK · accessed 7 October 2026
11. 11.Making Tax Digital for Income Tax: find out if and when you need to use it — HMRC / GOV.UK · accessed 7 October 2026
12. 12.Employers' liability insurance — GOV.UK · accessed 7 October 2026